Is It Always About the Money?

It’s no secret that a healthy amount of Americans are finding it difficult to save.  According to a recent CNBC article, 49% of Americans live check to check.  There are many reasons or factors that contribute to this reality, from low wages to complacency, to bad habits.  We hear about these factors everyday in the media, however, one area that very few are discussing is the relationship between a person’s emotional state, background, and self esteem to their financial disarray, bad habits, or financial illiteracy.

In my recent interview on Everything Cha-Ching with Pegi Burdict, The Financial Whisperer and author of “It’s Never about the Money…even when it is” she talks about the role our upbringing and emotions play in our financial decision making.  Sometimes, we see people such as celebrities and athletes that seem to have everything, yet according to Pegi, although they have things most people covet, “a lot of times, there’s unhappiness behind it.”  Of course there’s a sense of accomplishment with success, but some of the same insecurities that plagues a person before they become wealthy, famous, or successful are now going to be amplified if they remain unaddressed.  Whether it’s money, food, or drugs, it’s a tool that masks the real issue. 

It is very common that for anyone is emotionally vulnerable, who has low self esteem, or a low sense of self worth, to be more prone to having multiple parts of their lives negatively impacted.  For example, our confidence and the way we feel about ourselves is a part of the foundation to who we are.  If this foundation is cracked, it’s going to spill over into how we communicate, who our friends are, our level of health, spirituality, and finances to name a few.

As a Financial Advisor, I teach different habits that can help foster healthy financial well-being such as planning, being disciplined, living within one’s means, and saving and investing.  However, if one has emotional deficiencies that goes unresolved or ignored, those fundamental money lessons are of no use, because the ultimate end goal is to feel good about one’s self, at any cost.

I’ll use myself as an example.  After my divorce, understandably, my emotional state was low.  I had been married for 14 years, my ex-wife was headed back to Indiana, and I was now looking the reality of being a single father to two teenage age girls square in the eyes.  Being scared, very unsure of how things would turn out, I would go out and party a lot.  I was going to concerts, clubs, and/or sporting events, every single weekend.  I was spending way more money than I should have. 

That’s how powerful our insecurities, fears, and lack of self esteem or self worth can be.  Here I am, a Financial Advisor, and even though I have the traditional education and experience, none of that mattered.  I just wanted to turn up, mask my fears, run from a reality that scared the hell out of me.  I can look back now and see it for what it was, a temporary time of misspending money for the sake of my “happiness.” 

Eventually, I was able to work through some of these issues and shake myself back to reality, but many people don’t have that ability.  Now this isn’t to say everyone who abuses money has emotional issues, or that everyone with emotional issues abuses money.  We all go through times in life and experience emotional obstacles, but they will be manifested one way or the other. A lot of times, on the surface, it may seem that some people are just bad with money when it actually may not be about the money at all, but more so, how we use the money due to the way we feel about ourselves.

To hear my full interview on Everything Cha-Ching (WDJY 99.1 FM) with Pegi Burdict, The Financial Whisperer, for a more thorough look into how unconscious money habits can impact your financial life, I encourage you to listen below.

https://soundcloud.com/jamin-armstead/is-it-always-about-the-money

Resources

https://www.cnbc.com/2017/06/29/heres-how-many-americans-are-living-paycheck-to-paycheck.html

The New Financial System of the 21st Century

On a recent episode of my radio show Everything Cha-Ching (www.wdjyfm.com), I had the privilege of interviewing Stan Larimer, the “God-father of BitShares,”  CEO of Cryptonomex, a leading custom Blockchain development company.  Stan spent some time with me to discuss all things cryto-currency and the possibility of an economy based incorruptible currency.

With growing popularity of digital currency, whether in the news or on Netflix documentaries, there is widespread discussion and misunderstanding of what crypto-currency is and how it works.  According to Stan, digital currency was created as a “way that you can exchange money with anyone on the planet instantly, not dependent upon a centralized banking system.”  The banking system as we know it, capitalizes on our transactions.  Whether it is interest rates charged on loans or fees assessed for wiring money domestically or internationally, the system makes money off of money.  

By virtue of digital currency transactions being recorded on a blockchain, a public open-ledger that illustrates all of the transactions that have taken place, basically cuts out the need for a  centralized banking system.   The currency moves virtually and practically eliminates the ability for the currency to be corrupted or profited from. 

Because digital currency is still very new, it could be argued that currently, they are more of a speculative investment than actual currency for commerce.  There are a multitude of different currencies on the market right now, which leads to speculation, and this causes values across the board to fluctuate. (For further insight into digital currency and investing, here’s a recent Forbes article that I was able to contribute as well):  

https://www.forbes.com/sites/trangho/2017/11/01/bitcoin-bonanza-best-etfs-and-mutual-funds-for-bullish-bets-on-the-blockchain/2/#7361339cabb9

However, crypto-currencies such as BitShares, with expedient transaction time (3 seconds vs 3 days with Bitcoin) and, as of this article, very accessible value at $0.07 per share, make this currency very appealing.  According to Stan, Digital currencies such as BitShares, “can be purchased on exchanges like Openledger.info, which is simply a centralized clearing business built on top of block-chain that gives all the benefits of the decentralized system” to those who transact with it.

There is a lot of dust that needs to settle before we can ascertain exactly how digital currency will evolve.  While the government grapples with how to regulate and to control it (there really isn’t a way for it to be controlled), and the various currencies jockey for supremacy, and investors seek the silver bullet, one thing is for sure, digital currency is here to stay. 

To hear my entire interview with Stan Larimer and get a better understanding of digital currency and BitShares, listen on the following link: https://soundcloud.com/jamin-armstead/interview-of-stan-larimer-on-digital-currency

 

What is Life Insurance and Why You Should Have It

I firmly believe that life insurance is one of the most important financial vehicles a family or business could have.  In the event that a parent, spouse, business owner or partner would pass away, their ability to generate an income also deceases.  Therefore, life insurance supplements those lost wages and maintains the business or household economically.   

In a recent radio interview on Everything Cha-Ching, my guest Kevinn Burris, Owner of Assurance Financial & Insurance Services (www.afis-az.com) states that “life insurance helps maintain your financial plan beyond you,” and that if you “come from a family with no means, unless you want your children to go through the same things you went through, as far as not having means, if you don’t get life insurance, you’re subjecting your kids to go through the same things you did.  There is always a reason to have life insurance.”  Kevinn also states that life insurance “allows businesses and families to continue on, in some instances, for generations.”

One of the things I find very interesting is that we are very comfortable with the idea of insuring our vehicles and our homes, but there is a lot of discomfort involved when talking about life insurance. That discussion forces us to conceptualize and monetize our mortality.  Kevinn states that we may pay auto insurance for years and never have a car wreck, but there is a “100% chance that we are going to die, there’s 100% chance that our ‘number’ is going to hit,” so why would we not make sure our loved ones are taken care of?

Many people do have life insurance, much of which is through an employer.  However, as a nation, we are grossly under-insured.  A huge misconception is that if you have group life insurance through your employer, it is assumed that that amount is sufficient.  Even if you have 3-4x your salary in insurance coverage, that still won’t be enough to pay off a home, send kids to college, and/or put some money in the survivor’s pocket, failing to replace the lost income.  Group insurance should be viewed as the cherry on top to the personal policy that provides primary coverage.

Results of not having enough, or any life insurance, can be devastating.  For idea of that reality, please refer to this piece, https://www.learnvest.com/2013/03/dear-mom-i-wish-youd-had-life-insurance.

Please don’t allow this to be your situation.  Reach out to Kevinn at kevinn.burris@afis-az.com, or myself, and allow us to conduct a review of your needs to ensure your family is adequately protected.  Needing to hold estate (garage) sales or car washes just won’t be enough to protect your legacy!

Make Saving a True Priority

I’ve long and often held the position that, even though we live in one of the wealthiest, most financially blessed countries ever, as a society, we also live a life of serious financial stress.  I often joke that it’s probably less stressful to live in the rain forests of South America, hunting and gathering, than to live in our modern, tech savvy society, check to check.  A lot of this stress stems from the fact that, as a society, we just don’t save money very well.  According to a past Marketwatch article, almost 69% of Americans have less than $1000 saved!  http://www.marketwatch.com/story/most-americans-have-less-than-1000-in-savings-2015-10-06.  That is an astonishing amount of us that are basically one paycheck away from homelessness, or in the least, raiding our retirement funds in case of an emergency.

There are a plethora of reasons behind our insufficient savings habits, such as a lack of discipline and making good financial decisions.  Maybe, it is simply that good jobs and hourly rates just don’t exist anymore for the lower and middle class (which I would argue as a legitimate factor).  We can even rationalize that the value of the dollar just doesn’t go as far as it used too, therefore, neither will our paychecks. Regardless of the validity of these arguments, our financial habits have a direct impact on our ability to save and our overall financial well being, regardless of the inflation rate or our income level.

If you find yourself significantly stressed out over money, then there are several adjustments that can be made to alleviate that pressure and simplify your life.  But it does require discipline and sacrifice, and a willingness to live with less.  For example:

  1. Do you we need that “Mercedes?”—many of us cannot legitimately afford the car parked in our garage, it’s possible we can’t afford the garage either.  If you’re a year or two into your car payment and it exceeds 15% of your monthly NET income, NOT gross (we live off the NET), then it’s time to consider downsizing or getting rid of your vehicle!  I have done this before myself, and although it’s unpleasant, it’s better than living in stress and worry.  Fifteen percent doesn’t sound like much, but if your mortgage or rent is near the “recommended” limit of 28-30%, then almost half of your NET is being consumed by rent and a vehicle.  The change is worth it!  Alternative transportation, in the short term, could be used if available, such public transportation, occasional ride sharing with Uber or Lyft, and even carpooling to work. Considering your car is not upside down in value and you are diligent in saving in other areas, it shouldn’t take too long to buy a car outright, completely eliminating a car payment. 

  2. No cable- In my opinion, cable service is one of the biggest wastes of money.  In the average household of 3-4 TVs, cable and internet services can run approximately $200/month, or more.  I recommend having only internet and purchasing Roku or a FireStik, which have no recurring monthly cost.  These “sticks” allow you to stream movies like Hulu or Netflix, or purchase programs or “apps.”  I have recently done this myself, and eliminating cable alone is saving me close to $1500 per year.

  3. Gym membership- these can easily cost $600-800 per year, depending upon how swanky the establishment and package that was chosen.  With YouTube and DVD’s, it’s so easy to get a quality workout at home without having a ton of money worked out of your wallet (or purse).  Eliminate the membership, not the exercise.

  4. Side hustle-I have always been a huge proponent of a side hustle, or part time gig.  During my transition of leaving corporate America to go independent, I also had a part time job while I built my practice.  Even if you have a stable job or career, and feel you could save more, find a good side hustle.  Something you may enjoy and make some extra cash while doing it. 

If you are feeling the monetary strain, then by downsizing or eliminating your car, getting rid of cable and the gym membership, and finding a side hustle can have a dramatic impact on your budget.  It takes a bit of courage, but one can literally transition living from check to check, to having a net surplus from $400-$1000 per month easily, depending upon your situation.  If you are having debt and/or budgetary concerns and you want to make some positive changes, reach out to me at www.jdishonfinancial.com or jamin@jdishonfinancial.com.  If nothing changes, then nothing changes!

"Back to School" Shopping

As summer winds down and the first day of school approaches, the need to re-up on school supplies also draws near.  If you are anything like me, the idea of back to school shopping is about as appealing as pulling your bottom lip over your head! 

            So, if you have to brave the elements and face schools’ version of Black Friday, then here are a few tips to make the experience a little more economical, and dare I say, less cumbersome.

 

  1. Shop for supplies throughout the year.  Building up a supply of pens and pencils for example.  This way, you will have a surplus and fewer items to scour for during the back to school shopping carnage.

  2. Try to buy as many things as possible at the $1 stores.  Junior may complain that his Jansport book bag isn’t sold there, but it’s ok, he will live.

  3. Use items you already have.  Last year, my daughters’ list included a graphing calculator.  I didn’t want to pay $100 for a new one, so they used my TI-85 model from 1990.  I saved money, was able to laugh at their reaction to such a “hideous” calculator, and they did well in their respective math courses.

  4.  Stick to your list.  Back to school shopping can be a lot like grocery shopping on an empty stomach.  You had a few items on your list, but before you know it, your cart is full.  You will definitely save money by staying disciplined.

  5. Stick to the summer sales.  Similar to sticking to your list, buying as many items as possible on sale will help your bottom line.

  6. Refrain from name brands.  This brings me back to Jansport.  Does your/my child really need a $50-70 book bag?  It carries…ummm....books.  We all want our kids to look nice and feel included in the latest and greatest, but I would recommend just sticking to the basics.  If you really feel the need and budget to splurge, then nice clothing should do the trick.

  7. Leave the kids at home!  Our kids are experts at applying “peer pressure,” so leave them at home.  Don’t give them a chance to catch you at a weak moment.  All you need is the list, focus, and some discipline.  You will return home, proud of yourself.

The beginning of school is also a great time to think about starting or contributing to an existing college 529 plan. If you don’t have one and would like to know more or would like to discuss your current plan, please contact me.

 I can be reached on my website www.jdishonfinancial.com and email jamin@jdishonfinancial.  Thank you, and happy back to school shopping!

What Prince’s Passing Teaches

It has been slightly over a week already since we have lost one of music’s most gifted talents ever, Prince.  He has given us so many classic songs and memories!  Although we still mourn his loss, we are also coming to find that Prince left this world with no will or trust in place, an oversight or mistake that far too many of us make regularly.

Death is never a topic that any of us are overly eager to discuss, but including this topic in your overall financial plan is just as important as discussing risk or retirement planning.  What tends to happen, especially in Prince’s case since he had accumulated significant assets, when one doesn’t have post life instructions in place, everything will be decided by the deceased’s state of residence.  The state will basically become the administrator of the estate, determining who will inherit the remaining assets after the federal and state government levy the “death tax” or probate, and the outcome will almost always not be what the deceased would have wanted.

In Prince’s case, the respective governments are most likely licking their chops.  Most of us will never accumulate anywhere near the wealth of Prince, but the outcome of passing away with no will or trust will invite the probate process regardless. 

Now, I am neither a resident of Minnesota nor an estate attorney, but I discovered that Minnesota (Prince’s state of residence) has a fairly high death tax, approximately 16%, and the federal government’s is 40%!  Yes, that means that approximately 50% of Prince’s hard earned assets will NOT go to his next of kin! 

I am sure some may feel that the remaining $150 million being passed to his family is more than enough, and therefore disregard the issue.  But since the majority of us pass away with fractions of his estate value, we will need to rely on any life insurance proceeds paid out, or even worse, may need to sale assets and businesses to cover probate.  For the average household, this process can be devastating!

Regardless of the amount of assets I have accumulated upon my death, I have zero intention of donating any funds to any government, federal or state.  Here are a few things you can do to make sure your post life wishes are adhered too…

 1)    Create a will—This document is the easiest and most cost effective when it comes to documenting instructions.  It doesn’t need to be overly complicated, simply document your wishes regarding whom you would appoint as your estate administrator and where your assets should go.

2)    Create a trust—A trust is basically a will on steroids.  It is usually the document of choice for the more affluent, but anyone can really have one in place.  The cost to create one can be moderate to fairly expensive because the document is drafted and finalized by lawyers.  It is an ironclad way to ensure that all of your wishes will definitely be adhered too, no questions asked.

3)    Identify POD or beneficiary—Whether you have a will or trust in place, or neither, it is always a good idea to document a POD (payable on death) designation on your cash accounts (checking or savings) and beneficiaries on any investment accounts you may have.  This will provide immediate instructions if you were to pass away, and more importantly, those funds avoid probate.

4)    Have personal life insurance— I discussed this topic in depth in my blog post “CYA,” highlighting how important life insurance is to your financial plan.  Providing a beneficiary per such a policy will give clear direction as to whom the payout will go, but more importantly, allows your loved ones the ability to maintain financially in the deceased’ absence.  Unfortunately, not enough families have the appropriate amount of life insurance in place, let alone a will or trust to give direction on how the funds will be dispersed. 

 If you have any questions, please don’t hesitate to contact me.   Please, take the time necessary to ensure your hard earned money and assets will be taken care of and handled by someone you trust.

7 Ways to Fund the ‘Vacay

Ok, its practically Spring, which means vacation time is just around the corner.  We all work very hard, so it’s time to make plans to play hard!  With a few simple adjustments and some creativity, saving for vacation can be a little easier on the budget, and sometimes, even fun!

           

1)   Choose the right spot—It should go without saying, but being honest with yourself and choosing an enjoyable, yet affordable destination is very important.  If you’re contemplating going to Milan and are still working on saving your 3-6 month emergency fund, then that probably isn’t right strategy.

2)   All Inclusive Trip- Speaking of the right destination, this is a pretty crafty way to save money.  Most get-aways of this type usually help keep costs down because your food and beverages are already taken care of.

3)   Getting rid of unwanted stuff- This is one of my favorite ways to generate some cash flow.  Preparing for a garage sale isn’t fun, but man is it effective.  It’s a great way to make a few hundred bucks, and if you’re a pack rat like me, create some extra space at the house too!!  Talk about the win…win!

4)   My beloved side hustle- Picking up that extra gig on the side is something to consider.  You probably know by now, I am a huge side hustle proponent!  Uber, temporary or pa art-time slot, maybe even babysit.  Ok, maybe not the latter, but find something you enjoy and worth your time to help generate some extra cha-ching!

5)   Who needs cable or internet?  Well, actually, I do.  But, one strategy is to eliminate some extras in your budget.  Granted, this one takes some discipline, but if your looking to save a few hundred bucks, this is definitely a place to trim some fat!

6)   Be social at home- If we calculated how much we spent per month on Starbucks, pizza, movies, dining with friends, spas, and/or golf, I’m confident we would pass out.  Eliminate any combination of these items, or all of them for the truly driven, and watch the money pile up in savings account.

7)   Keep the change- This may be the least effective of the seven, but throwing your everyday pocket change into a container will definitely add up.  My daughters and I throw our spare change in a collective shoebox.  On a day of boredom, we counted it, and had over $100. 

 

            These are some different ways that will help you save some pennies here and there for that big’16 vacation!  While saving for your get-away, don’t neglect continued progress toward the emergency fund, 3-6 months of your monthly living expenses.  I hope these ideas help. Ifyou employ any of them, let me know how they worked out for you, would love to hear your stories!  Until next time, bon voyage!! 

The Beauty and Burden of Credit Cards

Credit cards are like relationships.  We could live without them, but they are convenient to have and make us feel good.  However, if misused, they can bring nothing but stress.  Regardless of how we treat them, in the end, it’s going to cost you!

Of course, I am being funny.  But there is nothing funny about the average American household carrying $5,700 of credit card debt.  Doesn’t seem overbearing on paper, but when that comes with an average interest rate of 18-22%, the struggle is real.

If you currently have credit cards, here are a few helpful tips that I learned along the way that can help you avoid some pitfalls I, like many others, have experienced in the past:

 -DO NOT use your cards at all.  Because of the interest attached, its always cheaper to just use your actual money.  But if you choose or feel you must use a credit cards, avoid consumables (food, gas, etc).

-Manage the amount you spend each month so that you can pay the balance off each month. This is great for your credit score, but still costs you more than using cash!

--Avoid having several cards at the same time. Having one or two is tolerable. Three or more cards can increase your potential for higher overall balances and can make your pay-off strategy difficult to execute and monitor.

--Avoid maxing out your credit lines. One practice that will kill your credit score and put you at risk for over the limit fees is using every available cent. If possible, limit yourself to using no more than 70% of your available balance. Again, your credit score will thank you.

--If you already have substantial credit card debt, it may be beneficial to consult a credit counselor. They can provide consolidation strategies that can lower your overall interest rate and make paying down your balances easier. They may also offer a variety of debt settlement options. I would make this a last resort, however if this an option you want to consider, make sure you have full understanding of the fine print and the impact on your credit score before you agree to anything.

The Tax Refund Dilemma

If you are anything like me, then you loathe this time of year and you’re not looking forward to doing your taxes.  As of this post, I still haven’t completed mine, and will probably drag my feet just a little longer.  I am not in a huge rush to write Uncle Sam a check just yet. 

However, for those that have some money coming their way, here are few things to think about as you consider your options on what to do with your refund.

 Don’t Blow Through It—Regardless of the amount of your refund check, you don’t want to waste it.  Don’t go to the mall, club, or blow it at your local casino at your favorite slot machine!  It’s very easy to spend the money when you receive it.  I would recommend putting at least half of it in your savings account, contributing to your emergency fund.  It always recommendable to have at least 3 to 6 months worth of monthly living expenses set aside in case of an emergency or job lose.  A tax refund could help you in that area.  Pay yourself first!

 Pay Some Bills—After paying yourself first, if you have some credit cards, it’s a good idea to allocate a portion to your cards with the highest interest rate.  Credit card debt is one of the worst types of debt out there, so I always recommend paying down those as quickly as possible.  Using tax refund is a good place to start.

 Invest a Portion—Depending on the size of your refund and whether you have already addressed your emergency fund needs, next would be to invest some of the refund.  I would advise making contributions into a Roth IRA or a brokerage account.  Give those funds a chance to grow.

 If you typically receive large tax refunds, it would be a good idea to reassess your W-4 tax withholdings and speak with a tax professional in detail.  Be sure to make adjustments so that you will bring home more per month than to wait until tax time to get your own money back.   Pay yourself first. 

If you have any questions or concerns, please reach out to me.  In the meantime, I guess I should prepare to file mine! 

401k: The Importance of a Rollover

            Recently, I wrote a piece on the importance of having and contributing to a 401k if offered by the employer.  Putting money away now and taking advantage of possible employer matches is paramount to making sure there is a nest egg when you are no longer able or willing to work.  

             Over a typical working career, many of us will or already have had multiple former employers, so it’s not uncommon to have a few “dormant” 401ks remaining at those institutions.  What should be done with them?  How do you help them continue to grow?  I have repeatedly come across this scenario with clients and, it’s important to be aware of the options and benefits available once one leaves an employer.

            Anytime you leave an employer, it’s a great idea to rollover, or transfer your 401k, to an IRA (Individual Retirement Account) as soon as possible. It gives you more control over those otherwise abandoned assets.  The longer a dormant 401k is left to linger, the greater the chances “outta sight, outta mind” comes into play and the opportunity to further control those assets is lost.  Lets take a look at the pros and cons of rolling a 401k over.

            Firstly, by rolling a 401K into and IRA, the assets are able to maintain their tax-deferred status.  One of the benefits of a 401k is that when the investments grow and appreciate, that growth is not taxed.  By rolling an old 401k into an IRA, you get to maintain that benefit.  Sometimes, the process is misunderstood as a taxable transfer, which it is not. 

            Additionally, once the assets are transferred into the IRA, you are able to gain even better control of how the assets are managed.  Within IRAs, one can invest in mutual funds, individual stocks, ETFs, bonds, and even real estate.  The more tools and choices available, the greater the potential that you can maneuver the markets and reach your goals.  This simply is not the case with 401ks.  401ks have their own set of benefits, but they only offer mutual funds that are pre-set for that account, one does not have access to the entire mutual fund world, let alone stocks, ETFs, etc.

            IRAs also allow you to add new money into the account, up to $5500/yr if you are 50 ½ years of age or younger and $6500 if you are 50 ½ and older.  There are no employer contributions involved since these accounts are individually owned or titled.  Obviously, with abandoned 401ks, contributions of any kind are not possible.  One no longer works for that employer, so there are no more payroll contributions being added to that 401k.  

            I have worked with many clients who have multiple abandoned 401ks, and consolidating them into a single IRAs definitely makes management and retirement planning more efficient.  If you find yourself having one or more old 401ks lingering at former employers, reach out to me.  Let’s get those funds consolidated, appropriately managed, and put them in a position where you can contribute, better track your progress against your goals, and get those assets back in your control!

C.Y.A-Cover Your Assets

Life is full events, planned and unplanned, good and bad, that can have a major impact on our lives, financial plans and budget. Few events, though, will have more of an impact on a family than death of a loved one. I cannot tell you how many people I have written life policies for that initiated them because they know someone who lost a loved one who was uninsured and now the survivor is scrambling to cover funeral expenses while trying to figure out how they will survive without the deceased’s income and presence. Not only is there an immeasurable emotional toll, but the financial impact can also be just as devastating. That’s why it’s so important to CYA!

One of the most effective ways to “cover your assets” (family and finances) is to acquire the right type and amount of life insurance. Many of us don’t like to think or talk about death. Let’s face it....it is an uncomfortable topic so we sweep it under the rug and/or put off that sort of planning. Discussing mortality isn’t pleasant, but it is one the most important aspects of financial planning and shouldn’t go unexamined.

Approximately 35% of American families are headed by a single parent and 72% of black families, are single parent families. I am included in those statistics. I have custody of my daughters......what if I passed away? How would my family continue to maintain and survive without me? Married couples and significant others share a similar dilemna. Lets take a look at the different types of life insurance and how having it can help us during one of life’s most emotional times.

The easiest and most cost effective type life insurance to acquire is group insurance that is provided by an employer’s benefits package. Typically, it costs a few dollars per pay period and is a multiplier of one’s annual salary or income. For example,if I made $50k/year,I could elect coverage at my salary or pay incrementally more for 2x or 3x my salary. The downside to group insurance is that it goes away when we leave our employer. Some group policies are transferrable when we separate from an employer, but it becomes at a much higher cost because it is then based on one’s individual age and health status.

Another form of protection is individual term life insurance which is probably the most practical and cost effective way to acquire life insurance. Term insurance is purchased to cover us over a certain period of time, for example 10,20,or 30 years. With term insurance, the cost, or premium, is based on one’s age and health status, but in most cases, can easily fit into your budget. The younger you are, the cheaper all life insurance is to buy, especially a term policy. So, if you are in your mid-20s to early 30s and don’t currently have a term policy, then this should be high on your list of priorities.

Another form of life insurance is whole or permanent life. These policies are much more costly, especially if you look into policy when you are older, but this type of policy is meant to cover you for your entire life. An added bonus is they have built- in living benefits, such as cash value. As you pay your premiums, equity builds up within the policy, similar to equity building in a home as you make your mortgage payments. So you are able to tap into the cash value for emergencies or as needs arise, similar to line of credit, as a living benefit.

Ideally, I suggest having both a whole life and term policy concurrently when you are younger and have a young family. You would employ a larger amount to cover things like future college costs, income replacement for a surviving spouse or significant other and possibly pay-off a mortgage. To compliment the term policy, you could have a smaller 50-100k whole life policy. This is beneficial because the whole life policy is still yours 40 years later, there to cover one’s final expenses. By then, the kids are grown and gone, home is paid for and you have savings accumulated for the survivors.

We spend our entire working lives earning and saving money, investing for different goals and hope to leave a legacy for our children. One of the worst things we can do is to risk losing our hard work by not insuring or under-insuring ourselves, leaving our families behind to struggle financially on top of the emotional scars.

If you have questions or concerns about how well you are insuring and/or protecting your family and loved ones, reach out to me and let’s discuss it. You want to make sure you are protecting your loved ones sufficiently by C.Y.A, “Covering Your Assets! 

401k: The Cost of Doing Nothing

Throughout the career of a Gen X or Y-er, we will commonly work for a multitude employers.  How many of those employers have you worked for that offered a 401k plan and, regardless of the length of your tenure, you chose to not participate?  Of those plans that you opted out of, how many offered a company match?  How many years did you elect not to participate?  The questions I am asking may not be applicable to you.  However, if it does apply,  you will want to have a thorough understanding of the financial impact of a company’s 401k plan to your future. 

During my career, I have heard from some clients the following reasons they chose to not participate(not including the situation where an employer doesn’t offer one):

 1) This is a temporary job and I 'won’t be here long enough for 401k plan contributions to matter.

2) Right now it is more important that I increase my take home portion. 

3) I feel more comfortable investing money in my IRA brokerage account.

4) I don’t know what a 401k is and I don’t want to take the time to learn.  I don’t know what questions to ask and I am intimidated by the verbiage and choices within the plan. So I am just going to ignore it all together.  

I’m not here to judge the validity of any of these reasons, as they are common why some employees choose not to participate in their company’s respective plans.  But let me ask you….have you considered the cost of not participating?  Let’s take a look see.

In this example, let’s assume that an employee makes $40,000/yr and contributes 5% into their company’s 401k plan.  This equals an annual contribution of $2,000.  If the employer matches even 50% of that contribution, the total yearly contribution would then be $3,000.  Over a span of 10 years, assuming the investments would return an average of 6%, the total compounded value would equal $50,559. 

So regardless of the reason for not participating in your employer’s 401k plan, this is an example of the money you are opting out of….leaving on the table.  Who couldn’t use that $51,000 in their life?   

Let’s now consider the same scenario, but removing the employer match……the result would equal $33,706.  That is a difference of $16,853!  So by not participating in your company’s 401k plan, not only are you giving up the ability to have your $20,000 ($2,000 contribution for 10 years) grow into $33,706, you are also ignoring $16,853 of free money from the company!  How many of us would walk by a $100 bill laying on the ground and not pick it up?  If you answer is not me, then I have to ask why would you walk by $16,853? 

Unless your employer doesn’t offer a 401k plan, there is no good reason to not participate.  Any money that you leave on the table now will not be there for you to use by you in the future when you need it.  If you need help understanding what a 401k plan is, how it works, investment options, etc, reach out to me and we can discuss. 

Choosing to do nothing is a costly decision that will impact your and your family’s future.

Welcome to my new blog, “Everything Cha-Ching.”

Welcome to my new blog, “Everything Cha-Ching.”

I am Jamin Armstead and I have been a “practicing” financial advisor for 10 years.  During my career, I have worked for a few major investment firms, and along the way, have discovered that my true passion is to work exclusively with Generation X, Y, and the minority community.

 

By starting J. Dishon Financial, I am able to have my own business doing what I love, which is to educate, by providing discussions and posting blogs that are practical, informative and fun, offering creative ways to be more financially efficient and disciplined over a variety of methods and topics.   What I won’t share on this platform are investing techniques, trading analysis, portfolio creation, or complex algorithms that will bore you out of your mind.  So, without further ado, let’s start discussing Everything Cha-Ching!

 

Several people have asked me, “Jamin, what are you doing or investing in that I should be doing or investing in?”  Most of my clients hate my response which is “everyone is different. What may be suitable for me may not be suitable for you.”  I also tell them, “There is no magic bullet, no secret potion, recipe or product that gives me the upper hand. I navigate the same markets and work with the same options as any other investor.”   That doesn’t receive a standing ovation either!

 

Truthfully, even though our income levels and goals may vary, we are all essentially cooking in the same kitchen and dealing with similar life stresses, such as debt concerns, tight budgets, high medical and education costs, taxes, etc.  All of these are legitimate factors that influence our ability to invest.  However, before one dives into the glamor of investing, it’s important to have saved an emergency fund, at least 3 to 6 months of monthly living expenses.  Anytime one invests, loss is possible and you don’t want to risk money you can’t afford to lose!

I have worked with clients that tell me they don’t have the emergency funds in reserve and aren’t sure how or where to start saving.  So, here are 4 ideas I call my Cha-Ching fundamentals for you to ponder.  They highlight what you are actually spending so you can see where you can start saving for that emergency fund.  Be honest with yourself and start tracking and saving your Cha-Ching!:

 

  1. They still make checkbooks?  Balance your checking account, literally!  When I sat down and started doing this, actually itemizing each transaction, it became more meaningful.  Literally use a check register or accounting paper and balance your checkbook every day.  I couldn’t believe how much I was spending on stuff like concerts, golf and my fav, Buffalo Wild Wings!

  2. Put your debit card on ice.  The convenience of swiping our cards makes it harder to track how much we are actually spending.  So to avoid that problem, use cash!  For me, it is much harder to hand over the last two $20 bills in my wallet than it is to swipe my card for a $27.95 purchase.  The cash in hand makes me think twice if I really need more golf balls right now!

  3. I spent how much…...on what??  It is very important to know what your expenses are.  I created two categories; set expenses (with debt expenses as a sub-category) and variable expenses.  Set expenses are fixed, never change (mortgage, auto payment, etc.).  Although debt expense is generally set, it is good to separate debt so you can track how much debt you have and the progress you’re making on paying it down.  Finally, variable expenses which are subject to change monthly (groceries, clothing, etc.).  Detailing this information will help you with the next habit.

  4. Budget??  As the old saying goes, we all plan for vacations, but seldom plan our finances.  As boring as it may seem, budgeting is super effective.  Write out your household income and all of your categorized expenses.  One of two things is bound to happen……. you’ll either be shocked because there’s more left over than you thought so you’re wondering where the hell your money is going, or that there simply isn’t enough and you need more income.  Regardless, writing this all out confirms your situation and definitely brings clarity.